FILE – This photo shows a sign of Rite Aid on its store in Pittsburgh on Jan. 23, 2023. Rite Aid, a major U.S. pharmacy chain, said Sunday, Oct. 15, that it has filed for bankruptcy as part of its effort to restructure its finances. (AP Photo/Gene J. Puskar, File)
Rite Aid Files for Bankruptcy Protection, Plans Business Sale
Rite Aid, a major U.S. pharmacy chain, has filed for bankruptcy protection and intends to sell a portion of its business in order to restructure its finances. The company is grappling with losses and numerous lawsuits related to opioids.
Business Continuity and Store Closures
While going through the voluntary Chapter 11 bankruptcy process, Rite Aid assures customers that its stores will continue to fill prescriptions and remain operational for both in-store and online shopping. Simultaneously, the company plans to expedite the closure of underperforming stores.
Debt Reduction and Litigation Resolution
The Chapter 11 process will enable Rite Aid to significantly reduce its debt and resolve litigation claims related to opioids in an equitable manner, according to the company.
Financial Challenges and Lawsuits
Rite Aid, with over 2,000 stores primarily located on the East and West Coasts, has been posting annual losses for several years. The company has been implementing cost-cutting measures and store closures to address its longstanding financial difficulties. It anticipates a net loss of up to $680 million in the current fiscal year.
Lawsuits relating to opioid prescriptions further compound Rite Aid’s financial risks. The company has already reached settlements, including a $30 million agreement with the state of West Virginia. The U.S. Justice Department has also intervened in a whistleblower lawsuit, claiming that Rite Aid filled hundreds of thousands of illegal prescriptions.
Challenges Faced by Drugstores
Drugstores, including Rite Aid’s competitors, have grappled with prescription drug shortages, staffing issues, and increased competition from online retailers like Amazon. CVS and Walgreens, Rite Aid’s larger rivals, have expanded into healthcare services, diversifying their revenue streams.
Financial Restructuring and Leadership Changes
Rite Aid’s bankruptcy filing in U.S. Bankruptcy Court in New Jersey lists $8.6 billion in total debts and $7.6 billion in assets. The company has reached a financial restructuring agreement with key creditors and secured $3.45 billion in fresh financing. It plans to close several hundred stores and transfer affected workers to other locations.
The company also announced the sale of its pharmacy benefits manager, Elixir, to MedImpact Healthcare Systems. Jeffrey Stein, a financial advisory firm executive, has been appointed as Rite Aid’s CEO.
Stock Performance and Previous Merger Attempts
Rite Aid’s share price has experienced significant decline, necessitating a reverse stock split a few years ago. In 2015, Walgreens attempted to acquire Rite Aid for $9.4 billion but ultimately bought only a portion of the company to satisfy antitrust regulators. Rite Aid’s planned merger with Albertsons in 2018 was called off.
Looking Ahead
Rite Aid’s bankruptcy filing aims to enable the company to address its financial challenges and navigate the evolving landscape of the pharmaceutical industry. The restructuring may offer opportunities for affected employees to find new job prospects.